In February, a Ninth Circuit magistrate in San Francisco ruled that drivers providing services to the popular food delivery service company, GrubHub, Inc., are properly classified as independent contractors and thus do not qualify for the protections of employees under California labor laws. Judge Corley surmised: “Under California law, whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition. With the advent of the gig economy, and the creation of a low wage workforce performing low skill but highly flexible episodic jobs, the legislature may want to address this stark dichotomy.”

In making her decision, Judge Corley emphasized that the most important consideration in determining worker classification revolves around the employer’s control over the “manner and means of accomplishing the desired result” (not its control over the desired result – i.e., the delivery of food to customers). Ultimately, she found GrubHub exerted minimal control over the details of its drivers’ work, including when they work, how long they work, and how and when they made deliveries.

This is a dramatic win for employers across California. This could be a large step in the right direction for certain types of businesses struggling with the employee/independent contractor decision, not only because it comes down in favor of classifying these workers as independent contractors but also because it was decided in federal court (as opposed to state court). California is notorious for having a high standard for establishing that workers are truly independent contractors, and this ruling may have an impact on future employee classification cases (particularly for gig companies).

Back in early 2015, Uber lost a motion for summary judgment in federal court, because the court determined the workers had met their initial burden in seeking to establish that they should have been classified as employees. Thereafter, Uber went on to negotiate a $100 million settlement in the case. Since then, gig companies (i.e., companies which operate primarily through temporary positions and short-term engagements) have been forced to make difficult and uncertain decisions as to whether their workers can validly be treated as independent contractors or not.

Regardless of the outcome of this particular case, this latest ruling is a stern reminder to California businesses that they must take care in classifying their workers properly. The wrong call could subject your company to tens of thousands of dollars in otherwise unnecessary liability. If you need assistance in properly classifying workers or have further questions, please do not hesitate to contact us.